HOMES ARE SELLING!!! PART II

Rich, I am way confused. Last week you were excited about homes that were selling and you were very positive. You ended by saying that the number of sales was less than last year. What  has you so excited? The rest of the story dear reader is the amount of activity that is going on. Since January of this year I have put together 10 deals buyers and or sellers. WOW! This is something I am hearing all over the Treasure Valley. Realtors are writing and receiving offers. Several properties have had multiple offers being submitted on them. Dear Reader let me tell you, THAT IS EXCITING!! First time homebuyers are buying, investors are buying. THAT IS EXCITING!!, things are heating up! Once the first time buyers and the investors start buying that means people can begin moving up to a bigger home. The wheels are starting to move! THAT IS EXCITING!! New construction homes are selling. THAT IS EXCITING!! Hey Rich, if that is true why are the number of sales down? Great question. Speaking personally less than half the deals I had going on closed. UGH! Some fell due to the buyers not being able to obtain financing (the credit they once had gotten was no longer available), some fell because the lien holders (sometimes the first, sometimes a junior lien holder) did not want to take such a low offer and/or the buyers did not want to pay more. This is also something I am hearing throughout the Treasure Valley. It is a very different market and will continue to be so. However it is very exciting. Next week find out how to receive your own bail out from the Government.

HOMES ARE SELLING!!!

Many people approach me and ask this question or some variation of it. Hey Rich, Can I sell my home? The answer is always yes. The real question they are asking is how much can I sell my home for and will it truly sell or must I buy it myself? The answer is yes it will sell. Oh, you need proof you say. Well as of Friday morning 4/24/09 according to the MLS search a total of 364 homes had sold so far in just Meridian alone. Of those that sold 103 were indicated as bank owned or REO and another 43 were short sales. Which means that 60% of the homes in Meridian that sold were not bank owned, reo, foreclosure, short sale type properties. Well if they weren’t bank owned, reo, foreclosure, short sale type properties than what were they Rich? They were homes owned by people like us. 81 of these were brand new homes that had never been occupied, 17 were under construction or to be built. People I have to tell you, HOMES ARE SELLING!!!

Now as Paul Harvey would say, the rest of the story. In the same time frame last year we sold 44 more homes. Darn the luck. That means about an 11% decrease since the previous year. But Rich, you sounded so positive. HOMES ARE SELLING!!!  you said. They are selling dear reader, however; things have changed. What you ask? More on that next week.

If You Are Going To Buy, Don’t Rent

Sounds simple enough doesn’t it. If you are going to buy, don’t rent. But Rich, you ask, where am I going to live? I have to live somewhere you say. I agree. You do need to live somewhere, however; do you necessarily need to be locked in to a lease for a year? Perhaps; that decision is up to you. What I am saying is that you need to plan your move so that when your lease is up you can leave and you have time to move into your new home without crashing at a friend’s place for a couple of weeks. Trying to buy a home, especially your first home, can leave many without the resources to afford to pay a mortgage and a rent. Some rental managers refuse to let tenants out of their leases. I actually heard of one that said the tenant was responsible for finding a new tenant. Hmmm, if you own a property do you truly want the tenant that is trying to get out of a lease to find the new tenant and show your property? The liabilities just make me shudder. Let’s get back to buying a home. So get with your Realtor and plan the move. The most frustrating of times is when you think that everyone will accommodate your schedule and then horror of horrors they can’t. They actually have their own schedule and they are going by what is written in the contract. Very frustrating to everyone involved. To avoid this you need to plan. Find out what the terms of your lease are and what can be done if you would like to get out of your lease early. Ask if you can go month to month if you are house hunting and need some extra time to close on a home. Most landlords are willing to help a good tenant out but keep in mind they need to protect themselves and keep the property rented. Try finding a solution that works for both of you. As a landlord I tried my hardest to not have a vacancy during Thanksgiving through January. Not so many people looking to move into rentals then however plenty of home buyers wanted to be in their home before the holidays. Other than that I was fairly open and accommodating if the tenant was working with me. So let everyone know what the plan is and then incorporate it into the contract. A good plan makes it easier on everyone and helps prepare for what is coming. Happy House Hunting, Rich

More Reasons To Buy a Home

 

If all the other reasons have not caused you to buy home, such as incredibly low prices and just as incredibly low interest rates, (who knows when that will change? I have actually heard of lenders raising rates because they have too much business??) To an excellent selection of homes to choose from then perhaps these reasons will help you decide.

 

I attended an economic meeting put on by a local building association. Their economist was actually quite fun to listen to as economists go. He did provide one segment of interesting information that I would like to share with you about the benefits of home ownership. He stated that the following things occur with home ownership:

1- There are less pregnancies (I believe/hope he was referring to our kids) when you own your home.

2- There is a decreased rate of incarceration when you own a home.

3- The school drop out rate decreases when you own a home.

4- There is an increase in the care and pride of a neighborhood when you own a home.

5- For our elected officials the amount of people who vote goes up with home ownership.

It makes sense to me dear reader. When you have a vested interest in something, time and/or money, you want to keep whatever it is you have and keep it in good shape. So go buy a home, meet your neighbors, set up a neighborhood committee, and work with your elected officials to make your neighborhood a better place to live.

I’m Twitterless and That’s OK!

I hear it around the office and on the news. Who is twittering who and what they are twittering about? The things people say and do. And now the twitter has gone from a social networking thing into a new way to do business. Need a job? Twitter. Employee needed? Twitter. I haven’t heard of selling a home yet however I can believe it has happened so please, no need to send the information. Is it new and unique? Nope! I believe similar things must have occurred previously when the telegraph was invented and the phone and so on. Different from anything else we have seen before? Not really.  It is just a different delivery system. The concept works because it is based on a social networking that exists prior to the deal being struck. Say What Rich?! I said it works because you know the person, and you rely on the trust built in that relationship. Which brings me to the point of this article? Many deals happen or don’t happen because of who you know, who knows you and who they know. I would venture to say that many more deals occur because of a relationship that exists prior to the deal being struck. This is why MLM systems work so well initially, you rely on your family and friends to help start the business. So Rich, if this is true why don’t you twitter? Because dear reader I prefer the old fashioned way of meeting people and getting to know them. Face to face. It has nothing to do with whether or not I am technologically savvy or not, (Yes I can turn on my own computer). It has to do with everything else that goes into establishing a relationship. Body language, expressions, tone of voice. These are not things you can learn from an IM, text, chat, email or twitter. When it comes right down to it, ya gotta meet face to face. So I invite everyone to set aside the cell phones, Blackberry’s, palms, Treo’s etc etc and let’s get back to basics. Let’s see who the people are we are doing business with. Let’s find local businesses that hire local people, who spend money where they live. Stop in and say hi to them. Get to know your neighbors where you live instead of the cyber neighborhoods you surf. I still visit with my neighbors over the fence. They know me and I know them. Instead of playing online I take my kids to the parks. I still go into the bank instead of using the ATM. I will never forget how a banker friend of mine introduced me to a loan officer. He said “This is Rich, I don’t know what he wants to do but whatever it is you will like it” WOW! After looking at my deal the lender said “Rich I don’t know if this business you want to buy will work or not but after what Floyd said I’ll give ya the loan” A computer can’t do that. But what do I know, I’m twitterless.

 

Bank Owned Properties For Sale, Some Not So Cheap

Everybody would like a deal. Homebuyers included. There is nothing wrong with that. The question is just what is a good deal these days. As of March in Ada County on our MLS there are approximately 251 bank owned properties for sale. Boise leads the list with 96, Meridian with 84, Eagle 34, Kuna 22 and Star with 15.** That seems like quite a few to choose from. And Yes I have gone and looked at some of these. I have looked both online and in person. Some offer a real opportunity for a home owner and some just miss the mark. How come you ask o wise reader? The answer is because real estate is truly a subjective thing. Lending institutions assign value to a property many different ways based upon their rules that they have established. This can sometimes lead to a good buy for a person. It may not be such a great deal for others. Sometimes the lender will assign a value based on information that has not been updated. Sometimes the lender picks a number that will entice multiple offers. The result is a bidding war between potential buyers. The best way you can help yourself is have someone represent you. Yes dear reader I am talking about a Realtor. In addition to the price the lender may have additional addendums and requirements that they want you to sign and do. Some lenders actually have an addendum that replaces the purchase and sales agreement and you can bet the addendum is written in their favor. Is this a bad thing you ask? I don’t know. Sometimes lenders want a form that they can use everywhere they have property to make it easier on them. They don’t want to be on the hook for something in the original contract they didn’t catch. Sometimes they are looking to make themselves additional profit. One lender demands that the buyer get a loan approval through their organization. Hmm what do you think reader? Happy House Hunting, Rich

 

 **(As of 2/23/09. The Intermountain MLS just started a system to identify these properties so the numbers may be off some while the listings get caught up with the new requirement.)

Should The Government Be Our Banker?

No, they should not be our banker. Do I really need to say more? Probably not but let’s look at what they are trying. Originally our Federal Government funded loans for homes mostly through Fannie Mae and Freddie Mac programs that were administered by private institutions. Policies were set up that made for good business decisions that led to good loans being made to people who for the most part are keeping up with their payments and not being foreclosed on. This is still happening today. I would estimate that 75% of all loans being written are using these programs and I have heard that possibly more than 90% by years end. That is a good thing. Now what’s not working? Bailouts, giving money to large institutions that are not doing so well because of poor business decisions without any guidelines and or rules does not work. Everyday the public is shocked to hear that the money is apparently being misused by these institutions. Not so surprising I say. The Hope for Homeowners Program is not working. I read a report and here is what it said. This report was sent to me in February. 25 Total number of loans that have closed under the Hope for Homeowners Program. There have been 451 applicants. The hope was to help 400,000 families. No comment needed. Source: http://www.realtor.org/RMODaily.nsf/pages/News2009020503?OpenDocument&WT.cg_n=RMO&WT.cg_s=RSSDaily

What about the new programs? Here are some highlights. The new refinance program from the Feds is for Fannie Mae loans only. It may be used for investment properties. You are allowed up 105% loan to value (current market price). You must have a stable income, a stable payment history, and limited cash out, with up to 40 years to repay. On the new loan modifications from the Fed the loans must be currently Freddie Mac or Fannie Mae. They are for 1^st liens only, must be owner occupied and the borrower must prove their income. If you want to find out if you qualify for the programs or not contact your favorite lender. If they can’t help you or don’t know call me. If you would like to check for yourself you can call 1-800-7FANNIE for Fannie Mae OR 1-800-FREDDIE for Freddie Mac.

www.richnesbit.com

More on Short Sales

As the number of people trying to buy short sales continues to grow it is probably a good idea to share some thoughts that buyers should consider before trying to purchase a short sale.

 

Buying a short sale is unlike any other purchase you have ever tried. It can be a long and difficult process. Get professional help! That means a Realtor. There is a great opportunity to buy a home for less than fair market value when buying a short sale. You can save 10-20% of the value of the home. In order to get this you must expect to give up something. The biggest thing you lose is time. Most buyers and sellers like to have a say in the time frames things happen in. The lending institutions don’t listen to these time frames. They have their own and follow them. So you must be patient. If you do not want to be patient don’t buy a short sale. Days can go buy with no contact from the lender. Lenders don’t always return calls in 24 hours; some take 72 hours or longer. Be patient.

 

You will not out negotiate a lender. They do this everyday multiple times a day. Make a reasonable offer. Trying to go unrealistically low may actually offend the person who represents the lender and they may try to be unreasonable back. They are human too and they get offended as well. I recall one negotiator I was working with getting so upset with me I had to remind him to calm down and not take it personally. Set a realistic value to the home with your Realtor and then send it in. There is nothing wrong with trying to get a deal, just don’t get too greedy. Most short sales are priced attractively to get an offer made. How much of a savings is enough to make the home worth buying?

 

Be ready to act! After all that waiting the lender may give you a very short time frame to close on the deal. Everyone on the team must be ready, willing, and able to act to get the deal done. Don’t go back to the sellers’ lender and ask for changes once the deal is struck. Keep in touch with your lender. Give them what they need to get the docs ready to submit in order to comply with the sellers’ lenders directions. Most short sales require the new lender docs to be ready 48 hours prior to closing. Don’t wait to the last minute. It may cost you. Be prepared.

 

Don’t forget you are making a profit when buying a home for less than fair market value. Is the money you are saving worth the extra work?

HOW DO I MAKE MONEY IN REAL ESTATE?

 

Read carefully my dear readers for I am about to give to you 2 secrets of how to make money in real estate. You can use this technique in any market, up or down. It works all the time and every time. The 1st secret is to buy low. It seems to me that this is pretty self explanatory however it seems more people were buying when prices were going up and now that prices have gone down there are not as many buyers. The investors are coming back and they are beginning to buy. The speculators are just about gone. The 2^nd secret in an investment property is to make certain it cash flows properly. Or you make certain you can afford the loss.

 

Buy low, sell high. Notice I didn’t say buy at the absolute bottom or sell at the peak. I have talked about this before. Then next item is to make certain that it cash flows properly. This is very important. If a property doesn’t cash flow properly then you are not investing you are speculating. You are hoping that the market keeps moving in the right direction and you don’t get caught short or worse!!! There are many models to choose from on determining proper cash flow as well as many rules of thumb that allow you to take a glance at the property and determine if it may fit your business model. Business model did you say? Yes! You need to formulate a business plan that allows you to make investments in your business that results in your making a profit. What about the rent? Isn’t that my profit? It can be depending upon your business model. For most rental properties rent is cash flow. Some month’s cash flow is good some months not so good. The trick is to have lots more good months than not such good months.

2009 A YEAR TO LOOK FORWARD TO

What an exciting time for us. As we head into a New Year facing the uncertainties of our past I am excited about our future. Whenever there have been bad things happen to us as individuals, a community, a country I generally find that things get better. It can take time to heal, to grow, to change. However I find that usually we move onward and for the better. I recall when I was having my third back surgery, how much worse could it get? What did I do to deserve this? I was being told that my career as a journeyman electrician was over, I did not have enough money to pay the bills, and my remodel was half completed. Man was it terrible. Here it is 7 years later and I have a great new career, a second child and things have gotten better. And I think, how lucky can one guy be?

 

What’s this Rich? You ask. Aren’t you a realtor?  Isn’t the real estate market in the toilet? Why yes I am a Realtor, thanks for asking. Is the market in the toilet? That perhaps that depends on where you are. Prices are low, probably lower than what 2004 prices were before the huge, I mean mondo huge, explosion of nuclear size proportions huge, price jumps we had. If you bought during that time frame or refinanced than yes things can be bad for you, right now. The truth is 90% of the homes in America today are doing ok. You want proof you say? Ok, take a walk around your neighborhood and see how many homes are short sales, or have been foreclosed on. If you live in a newer neighborhood, look at a more established neighborhood and vice versa. Then tell me what you think. About 90% of the homes are doing okay. I think things are getting back to normal and the future looks promising. How come? The signs are there. 1^st time home buyers and investors are back in the market. This means homes are being bought and sold. In 2003 in Ada County we sold appx 5,800 residential units, in 2008 we sold 4996 residential units. Slow? Yes! When will the official end be? I will tell you 6 months to a year after it happens.

www.RichNesbit.com